Homeowners Want To Salvage Big Down Payment From Foreclosure

December 13, 1986|By Robert Bruss, Realty notes.

Q-We are hopelessly behind on our mortgage payments to the seller of the home where we now live. Due to illness and unemployment, there is no way we can pay the $7,950 payments we owe her. She has begun foreclosure and the auction is scheduled for next month. We tried to sell the house but the market in our town is very slow now due to high unemployment. When we bought this house, we stupidly paid a large down payment of $22,000. Is there any way we can get our $22,000 back so we can start over?

A-Your situation is a classic example of why I recommend making as small a cash down payment as possible when buying real estate, especially a home.

I suggest trying to negotiate with the lender. Offer her a deed in lieu of foreclosure. Although the lender has no legal duty to pay you anything, if the lender would like her house back, she may be willing to pay you something.

But if not, try to make a quick sale. Since you probably don`t have enough time before the auction to list your home with a real estate agent, try advertising it in the newspaper with an ad such as ``Real Steal Deal, just $12,000 down.`` The buyer also would have to either get a new mortgage or pay the $7,950 payment arrearage if the mortgage is assumable and can be reinstated. It`s better to take $12,000 or whatever you can get rather than to let the house go to the foreclosure auction sale and get nothing. Consult a real estate attorney about the legal aspects.

Q-My husband and I are talking about buying a home. But we aren`t sure we can afford one. He earns about $36,000 per year and I make about $15,000 from a part-time job. We have one child with another on the way. How much of a home can we afford and how much cash down payment will it require?

A-The general rules are (1) you can afford a home priced 2.5 to three times your gross family income, (2) the cash down payment should be at least 10 percent of the purchase price, and (3) the monthly mortgage payment should be not more than 28 to 33 percent of your income.

Of course, if your down payment is larger or smaller, then you will be able to afford a larger or smaller home.

Based on your $51,000 total annual income, you can probably afford a home priced up to $150,000 if you can come up with at least $15,000 cash down payment.

However, if you can keep your mortgage below $133,250, then you will get a better interest rate so a slightly greater cash down payment will save interest. The reason is most loans below $133,250 are sold to Freddie Mac or Fannie Mae.

To illustrate, let`s suppose you find a nice $140,000 home and you have $14,000 for the down payment plus perhaps $4,000 for closing costs such as loan fees. If you get a 30-year $126,000 mortgage at 10 percent fixed interest, your monthly payment will be $1,106. That is 26 percent of your $4,250 monthly income, so you should have no trouble qualifying for the mortgage unless you have bad credit or a large amount of installment loans.

Q-My barber told me the best way to sell my house is to call several real estate agencies and give them an open listing. He says that way if I find a buyer I don`t have to pay a real estate sales commission. I phoned two realty agencies and they sent out their agents. Both refused to accept my open listing. I thought agents were begging for listings as homes are selling very well in my neighborhood. These two agents wanted exclusive listings for at least 90 days. What should I do?

A-An open listing is no listing at all. It is merely an invitation to one or more real estate agents to find you an acceptable buyer. The first agent to get you to accept an offer earns the entire sales commission. However, if you find a buyer or withdraw the home from the market, then no sales commission is owed.

Most real estate agents hate open listings because the agent lacks control over the listing. It becomes a race between the seller and the agent to find a buyer. The majority of realty agents either refuse open listings or they work on them only on rainy days when there`s nothing else to do.

Q-The electric company wants to put a power line easement over some land I was holding for future development. This easement will greatly diminish the potential since it will go through the middle of my land. My attorney is fighting them but they are ready to condemn an easement. What can I do to stop this?

A-Many utility companies try to put their wires where they will cause the least environmental and economic damage. Perhaps you can suggest a better location which won`t damage your property`s development potential. But don`t forget utility companies have eminent domain rights to condemn easements. However, the property owner must be paid for the diminished value of the land. Be certain your attorney is experienced with condemnation law.